Despite the weakest employment since 2013, Markit's Services PMI bounced modestly in September to 52.3, but "business optimism about the year ahead is at one of the lowest levels seen since the global financial crisis."
Following August's crash to the lowest since Feb 2010 (51.4), ISM Servces has exploded to 57.1 – its highest since Oct 2015 – in an epic farce – the biggest jump on record. However, as Market concludes, "even with the latest increase the surveys are indicating that the economy is growing at an annualized rate of only 1%."
This is the biggest MoM jump in ISM Services in history…
The last 2 times ISM Services jumped this much, the economy crashed into recession…
ISM Breakdown…
ISM Respondents:
"Somewhat flat month of overall pricing conditions; however, labor cost and availability remains a concern." (Accommodation & Food Services)
"Business is showing a moderate unexpected uptick over last month. YTD business volume is moderately under forecast." (Management of Companies & Support Services)
"Macroeconomic issues like Brexit and reduced travel from South America impact summer travel." (Arts, Entertainment & Recreation)
"Sales ahead of plan. Net income below plan. Costs running higher than plan. In addition, continued low interest rates impact investment results." (Finance & Insurance)
"Affordable Care Act, changes in Medicare and Medicaid causing problems across much of the healthcare and insurance industries. Acquisition helping our company, but also lost a large client that will impact our financials for the next year." (Health Care & Social Assistance)
"Solid steady growth." (Professional, Scientific & Technical Services)
"Business is [at] an annual high." (Public Administration)
"Sales continue [at an] increased pace from last month." (Retail Trade)
"We are watching the effects of the Hanjin Shipping issues with regard to cost and availability of Asian imports." (Wholesale Trade)
Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“Coming hard on the heels of the IMF’s downgrade to the US economic outlook, the upturn in the PMI is a welcome development and suggests that the pace of economic growth gained some momentum in September. However, take a longer look and it’s clear that this is by no means a robust upturn.
“Even with the latest increase the surveys are indicating that the economy is growing at an annualized rate of only 1%.
“The survey responses reveal that a heightened degree of political uncertainty is subduing the economy, manifesting itself in particular in a marked slowdown in corporate hiring. Across both manufacturing and services the surveys point to the smallest monthly gain in jobs since April 2010, consistent with a mere 115,000 rise in non-farm payrolls.
“Business optimism about the year ahead is at one of the lowest levels seen since the global financial crisis. The surveys therefore add ammunition to those arguing for the Fed to hold off with hiking interest rates again, at least until the dust settles after the election.”
Charts: Bloomberg
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